Exam 9: Profit Planning and Activity-Based Budgeting

The following information relates to DFW Corporation: · All sales are on account and are budgeted as follows: February,$350,000;March,$360,000;and April,$400,000.DFW collects 70% of its sales in the month of sale and 30% in the following month. · Cost of goods sold averages 60% of sales.Purchases total 65% of the following month's sales and are paid in the month following acquisition. · Cash operating expenses total $60,000 per month and are paid when incurred.Monthly depreciation amounts to $18,000. · Selected amounts taken from the January 31 balance sheet were: accounts receivable,$115,000;plant and equipment (net),$107,000;and retained earnings,$85,000. Required: (NOTE: Ignore income taxes in answering these questions). A. A.Prepare a budgeted income statement that summarizes activity for the two months ended March 31,20x1. B.Accounts receivable: $115,000 - $115,000 + $350,000 - ($350,000 * 70%)+ $360,000 - ($350,000 * 30%)- ($360,000 *70%)= $108,000 Plant and equipment (net): $107,000 - $18,000 - $18,000 = $71,000 Retained earnings: $85,000 + $128,000 = $213,000 B.Compute the amounts that would appear on the March 31 balance sheet for accounts receivable,plant and equipment (net),and retained earnings.

Sainte Claire Corporation has a highly automated production facility.Which of the following correctly shows the two factors that would likely have the most direct influence on the company's manufacturing overhead budget?

Bison Sporting Goods sells bicycles throughout the northeastern United States.The following data were taken from the most recent quarterly sales forecast: On the basis of the information presented,how many bicycles should the company purchase in August?

The following selected data pertain to Phineus Corporation: July's cash disbursements are expected to be:

The budgeting technique that focuses on different phases of a product such as planning and concept design,testing,manufacturing,and distribution and customer service is known as:

The budgeting technique that focuses on different phases of a product such as planning and concept design,testing,manufacturing,and distribution and customer service is known as comprehensive budgeting.

Dragon makes all sales on account,subject to the following collection pattern: 30% are collected in the month of sale;60% are collected in the first month after sale;and 10% are collected in the second month after sale.If sales for June,July,and August were $120,000,$160,000,and $220,000,respectively,what were the firm's budgeted collections for August and the company's budgeted receivables balance on August 31?

A company that uses activity-based budgeting performs the following: 1-Plans activities for the budget period. 2-Forecasts the demand for products and services as well as the customers to be served. 3-Budgets the resources necessary to carry out activities. Which of the following denotes the proper order of the preceding activities?

Telfair & Company had 3,000 units in finished-goods inventory on December 31.The following data are available for the upcoming year: The number of units the company expects to sell in January is:

A company's plan for the acquisition of long-lived assets,such as buildings and equipment,is commonly called a:

Gingham's budgeted cash receipts in February are:

Consider the following statements about budgeting and a product's life cycle: I.Budgets should focus on costs that are incurred only after a product has been introduced to the marketplace. II.Life-cycle costs would include those related to product planning,preliminary design,detailed design and testing,production,and distribution and customer service. III.When a life cycle is short,companies must make certain that before a commitment is made to a product,the product's life-cycle costs are covered. Which of the above statements is (are)true?

Which of the following statements concerning the budget director is false?

Gingham's budgeted cash payments in February are:

Scotch Company plans to sell 400,000 units of finished product in July 20x1.Management (1)anticipates a growth rate in sales of 5% per month thereafter and (2)desires a monthly ending finished-goods inventory (in units)of 80% of the following month's estimated sales.There are 300,000 completed units in the June 30,20x1 inventory. Each unit of finished product requires four pounds of direct material at a cost of $1.50 per pound.There are 1,600,000 pounds of direct material in inventory on June 30,20x1. Required: A.Prepare a production budget for the quarter ended September 30,20x1.Note: For both part "A" and part "B" of this problem,prepare your budget on a quarterly (not monthly)basis. B.Independent of your answer to part "A," assume that Scotch plans to produce 1,200,000 units of finished product for the quarter ended September 30.If the firm desires to stock direct materials at the end of this period equal to 25% of current production usage,compute the cost of direct material purchases for the quarter.

End-of-period figures for accounts receivable and payables to suppliers would be found on the:

Santorini Corporation has experienced a number of out-of-stock situations with respect to its finished-goods inventories.Inventory at the end of May,for example,was only 50 units-an all-time low. Management desires to implement a policy whereby finished-goods inventory is 70% of the following month's sales.Budgeted sales for June,July,and August are expected to be 5,000 units,5,600 units,and 5,500 units,respectively. Required: Determine the number of units that Santorini must produce in June and July.

Swansong plans to sell 10,000 units of a particular product during July,and expects sales to increase at the rate of 10% per month during the remainder of the year.The June 30 and September 30 ending inventories are anticipated to be 1,100 units and 950 units,respectively.On the basis of this information,how many units should Swansong purchase for the quarter ended September 30?

Generally speaking,budgets are not used to:

Activity-based budgeting: